Sunday, 15 November 2009

The Amazing Race 15, Episode 8 (Health care reform & travel)

Haggvik (Sweden) - Tallinn (Estonia) - Keava (Estonia):

USA health care reform, travellers, and expatriates

Last week's episode pushed the contestants on The Amazing Race to their physical limits, leading me to explore the physical prerequisites for extended independent travel. This week's episode was almost equally grueling, and brings us to the question, "What happens if you push yourself too far, and get hurt or sick while abroad?"

That's a huge question, involving what level of medical care is available, how much it is likely to cost, whether to seek treatment locally or return home if you are injured or ill, and how all these things vary from place to place. My FAQ About Travel Insurance describes some of the general types of specialized insurance for travellers, but barely scratches the surface. By popular demand, I plan significantly expanded coverage of all these issues in the next edition of "The Practical Nomad: How to Travel Around the World".

For now, let's look at just one piece of that problem:

How might health care "reform" in the USA affect medical treatment for travellers and expatriates and, potentially, the need for people travelling or living abroad to purchase special health insurance to meet their needs?

Different categories of travellers and expatriates have different stakes in health care reform. Who would be covered by the health care proposals now being considered by Congress? Who should be? Who would benefit financially and/or medically, and who would lose out? Let's consider the taxonomy of travellers and expats from and to the USA:

Citizens of the USA travelling abroad

Citizens of the USA living abroad

Citizens of other countries visiting the USA as travellers

Citizens of other countries living in the USA

1. Citizens of the USA travelling abroad: Most health care payment plans offered in the USA, including health maintenance organization memberships, health insurance plans, and government programs such as Medicare, offer more limited reimbursement of health care expenses outside the USA than within the country. Some programs (e.g. Medicare) don't cover treatment abroad at all. Others cover only emergency treatment, and/or reimburse a lesser percentage of overseas medical expenses than of those in the USA, often by treating all health care providers outside the USA as "non-preferred" providers. Most USA-based insurance plans and HMO's cut off coverage entirely for people who are outside the USA more than 30 days at a time (sometimes 60 days or, rarely, 90 days, but almost never longer except for special travel or expat policies).

That's stupid of insurers, reflecting motives of risk aversion ("foreign=unknown=risky" in the minds of most financiers in the USA) combined with a lack of actuarial and cost analysis. Health care -- even sophisticated high-quality high-tech tests and treatments -- is cheaper almost anywhere else in the world, including both First World and Third World countries, than in the USA. The difference is so extreme that many people find surgery abroad, paid for 100% out of pocket, costs less than the co-pay for the same surgery under their health plan in the USA. Health care payers in the USA could substantially reduce their costs (and their premiums, membership fees, or tax burden) if they forced sick Americans to get major medical treatments (especially non-emergency surgery or labor-intensive rehabilitative treatment) abroad. I'm not saying they should do that, but clearly they do themselves and the public a disservice when they exclude coverage for a class of people -- people travelling and being treated outside the USA -- who can be expected to have lower-than-average medical expenses.

Christopher Elliott, who was the first to raise this issue, has pointed out that none of the health care reform bills on the table would require insurers, HMO's, or the "public option" (if any) to include coverage or reimbursement for treatment abroad. There's no champion for travellers in Congress. International travellers are a very small percentage of US citizens, and not perceived as a voting bloc. So international travellers from the USA will probably still need to self-insure and/or buy special supplemental medical insurance.

2. Citizens of the USA living abroad: US-citizen expatriates are a mixed lot. Many are dual citizens or permanent residents of other countries who are covered under (and pay taxes for) another country's national health care scheme. Others self-insure and pay as they go, or buy insurance locally, in places where both health care and insurance are cheaper than they are in the USA. Neither group wants to have to purchase duplicate medical insurance coverage, or see their health care costs raised to US levels.

As Paul Karl Lukacs explains in Why Expats Should Not Be Forced To Buy National Health Insurance , the effect of the current proposals would be to further punish anyone with a US passport who chooses to live abroad. It would be not only a de facto expat tax, but a regressive one: The burden of mandatory insurance at US prices would be especially onerous for those living on local incomes in lower-wage countries. Medical insurance in the USA, on average, costs more than the median world wage. That would make it difficult or impossible to accept work at local wages (or volunteer at no wage in exchange for room and board), even if you were willing to live your life in a local way and at a local material standard of living.

It's hard to win public sympathy in the USA for people perceived as having chosen to leave their country, even if the least well-paid of them are among the people who are doing the most to improve the foreign image of the USA and its people. An expat surcharge for health care may be popular with many in Washington, and their constituents at home. US citizens living abroad can vote for electors for President in the state where they last resided in the USA, but not for members of the House of Senate. But to the expat community of US citizens, it adds insult to the injury of the duplicate US tax on expats' earnings: Most citizens of other countries are taxed only once on their earnings, regardless of where they live, while most expatriate US citizens are taxed twice on the same income, by the USA and by the country where they live or earn their money.

The argument that is most likely to persuade Congress to require coverage for treatment abroad isn't the desirability of covering US citizens travelling abroad (see section 1 above), but the unfairness of requiring US citizens living abroad to buy insurance that won't provide them with any coverage. Most expats, though would probably prefer a provision that bases the obligation to have insurance or belong to an HMO on residence in the USA, rather than citizenship, which would do nothing for short-term travellers or the large numbers of people who live or travel abroad for extended periods as visitors, without holding a second passport or establishing legal residence in another country.

3. Citizens of other countries visiting the USA as travellers: Most visitors to the USA already buy special supplemental US-visitor major medical insurance.

Some backpackers and travellers from poorer countries gamble and don't buy insurance. They hope they won't get sick or hurt, or that if they do, they can go home for treatment. Some simply don't think of travel health insurance, accustomed as they are to travelling in countries with reciprocal agreements between their national health systems, or where paying for emergency health care out of pocket is relatively affordable. But most have heard the horror stories: a "routine" car crash in the USA can leave you with more in medical bills than a lifetime of medical expenses in most other countries.

Most standard health or travel insurance plans in the rest of the world, except those specifically designed for travellers to the USA, completely exclude coverage while you are in the USA. If you're not a US citizen or resident, supplemental medical insurance that includes coverage while you are in the USA routinely costs twice as much as travel medical insurance that covers you everywhere else in the world, but excludes the USA.

So those foreign visitors to the USA who feel they can afford it are already paying (and paying through the nose) for travel medical insurance. They would be unaffected by any of the current proposals limited to citizens and residents, but they would be unlikely to see any advantage to a system that required insurance for everyone even temporarily present in the USA. Their interest, presumably, would be in reciprocal agreements between the USA and their home countries' national health schemes (difficult to imagine except in the context of a single-payer system in the USA), and/or a system under which care would be provided independently of anyone's ability to pay (even more unlikely)

4. Citizens of other countries living in the USA: Most foreign citizens who live in the USA either buy health insurance in the USA or specifically tailored for people living in the USA (if they can afford it), or self insure if they can't. Many, perhaps most, self-insured foreign residents go back to the country of their citizenship to get treatment (either under their national health scheme, or paying out-of-pocket in countries where care is much cheaper than in the USA), if they need non-emergency care that they can't afford in the USA. If they can't afford emergency care, they get dumped into public hospitals -- many of which provide the best available trauma and emergency care, but can ill afford to absorb the cost of writing off treatment of indigent foreigners.

In the absence of a single-payer system or some other way of guaranteeing not merely available medical insurance but affordable insurance or medical care, it's an open question whether most green card holders would see mandatory medical insurance as currently proposed as a burden or a benefit. "Foreigners" are perennial political whipping boys of jingoism (and not just in the USA), but we are talking here, by definition, about about those foreign citizens with the legal status of "residents".

I would have expected at least some debate about this, but I haven't been able to find a comparison of how the health care reform bills would treat green card holders. My impression, though, is that most if not all of the current proposals would include anyone who is either a citizen or a resident of the USA, thus covering both green card holders and US citizens abroad.

Where does this leave us? It's taken as axiomatic in US political commentary that domestic concerns will always trump international ones, and that's almost certainly true here. Health care, while sometimes argued from a comparative international perspective, is certainly presumed to be a domestic issue. But as this analysis shows, in a world of global movement (even if people can't move about the world as freely as capital, goods, or information) and continued global diversity in government policies, even such a "domestic" question has its international implications -- centering, in this case, on international travellers and expatriates.

As an American ex-pat living in Brazil I've been worried about the effects of requiring health insurance for citizens living abroad. A careful reading of the bill passed by the House shows that that citizens living abroad (defined by IRS rules) will not be required to purchase insurance.

In my case, I have health insurance coverage through my wife who is Japanese, but I don't if I could prove that her policy (written entirely in Japanese and designed for the Japanese health system) covers the "minimum standards" that will be required by this bill.

Of course the final bill has not been passed yet, but I share your concern that overseas Americans seem to get no sympathy or concern. We're not all rich businessmen on expense accounts!

Finally, a small correction. I believe that overseas voters can vote in all federal elections which includes, offices of President, U.S. Representative, and U.S. Senator--not just for the President as you stated.

Posted by: Ben, 17 November 2009, 08:44 ( 8:44 AM)

On #1 I'd at least like to require health insurance to cover the vaccinations travelers get before leaving for a trip.

I would have never thought of travel insurance until I got ill in Spain a few years ago, thank goodness I had gotten it by that time or I would have had a nightmare!

Posted by: carmel, 17 November 2009, 13:02 ( 1:02 PM)

I was abroad once and broke my leg in a sporting accident and man was I sorry!

Posted by: maria, 19 November 2009, 09:46 ( 9:46 AM)

Even i am very much conscious to prepare before going for a trip.I always keep in mind to take all the health related measures.Vaccinations, necessary tablets, things like mosquito repellent etc are very much useful things which we can carry with us on the trip. Not taking so much of outside stuff is also one of the preventive measures.

Posted by: Anonymous, 24 November 2009, 20:07 ( 8:07 PM)

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